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The U.S. is currently in the midst of the longest economic expansion since the period following World War II. But even though the numbers are good, they don’t add up to prosperity for all Americans. William Brangham talks to Matthew Slaughter of the Tuck School of Business and Equitable Growth's Heather Boushey about factors contributing to the era of growth and the potential dangers lying ahead.
The numbers are mainly positive, but, for many Americans, the math doesn't always add up.
The U.S. is in the midst of the longest economic expansion since after World War II.
William Brangham examines that long progress and the potential dangers ahead.
As America celebrates its independence, it's a time to recognize some good economic news.
July marks the 121st consecutive month of economic growth. That's dating back to President Obama's tenure, coming right after the 2008 financial crisis and the Great Recession, and continuing all the way through President Trump's time in office so far.
Moreover, the unemployment rate is today at a 50-year low. But, by other measurements, it's been an uneven period. Wage growth is better of late, but still lags historically. And the wealth gap between the rich and the poor has grown to near record levels since the recession.
Some perspective on all of this from two economists.
Heather Boushey is the president and CEO of the Washington Center for Equitable Growth, which is a D.C.-based think tank. And Matthew Slaughter is the dean of the Tuck School of Business at Dartmouth. He served on the president's Council of Economic Advisers under former President George W. Bush.
Welcome to you both.
Matthew Slaughter, to you first.
I don't know if you can still call 11 years a streak, but this is a pretty remarkable economic streak that this country has been on. What do you attribute this to?
It really is a record streak.
And I think one of the major credit credits goes to the Federal Reserve. If we go back 10 years ago, I think we sometimes forget we were still in the depths of the financial crisis, there was great uncertainty about the stability of America's banking system.
And the Federal Reserve, first under Chairman Bernanke and then Chairman Yellen, undertook really historic interventions to expand the size of the Fed's balance sheet and change the kinds of assets they held. That really stabilized our financial system and was building the foundation for confidence for American businesses to start hiring again.
So, credit, I think, first and foremost goes to the Fed. I think the fiscal stimulus Congress had in 2009 and the years after that helped a bit as well. And I think a third force was just the natural healing of businesses in America to regain some confidence to be more aggressive in terms of capital investment and also hiring Americans that brings us to this really amazing point of pretty much full employment today.
Heather Boushey, what would you add to that?
Well, I think that's a great list.
Certainly, the actions of the Fed and the Recovery Act that was passed in 2009, when Obama took office, certainly had a really large effect. I do want to note, though, that, while we have this very strong recovery for a very long period of time, there's really an opportunity now to sit back and look at some of the underlying fundamentals of the economy that haven't been doing as well.
And I want to make sure that we focus on that, because while the aggregate numbers, aggregate employment is low, and aggregate growth has been steady for many years now, we haven't actually seen the same kind of income gains across families all across the economy.
So those aggregate numbers really do mask this growing inequality in income and wealth and across different kinds of families all across the United States.
And so the strength of the economy right now really provides an opportunity to sit back and say, OK, we can look at the panoply of economic policies and figure out, with a strong economy and a lot of money flowing through the economy, what we could be doing to address these fundamentals.
Matthew Slaughter, let's pick up on a bit of that.
As Heather points out, wage growth, while it has ticked up a little bit in the past, recent — in the recent past, is still sluggish over the last period of time. Economics 101 tells you that, when there's low unemployment, employers have to raise wages to hunt for those scarce workers.
But we haven't seen as much of that. Why is that?
Yes, Heather is exactly right. We have had too poor wage growth for far too many workers and family.
So we have seen wage growth pick up the past couple years for most workers in America. A lot of that, though, is building back lost wages from the early years in the depths of the recession. So part of it, the healing of the labor market, for a lot of Americans, they're just basically getting back, in inflation-adjusted terms, to where they were before the financial crisis, and, for some, even a much longer period.
But in terms of economics 101, a fundamental challenge that our economy has been facing has been quite slow growth in what economists call labor productivity. So, that's the real foundation of sustainable growth, that proverbial rising tide.
That, combined with forces like globalization and technology innovation, that are raising the demands for very skilled workers, that combination has meant we have had far too slow growth in wages for far too many American workers and their families.
Heather, on the issue — it's related to this, but the issue of jobs — and we care about the number of jobs, the number of people who are actually working, but the quality of those jobs also matters, whether I — whether I, as an employed person, can actually support my family on what I'm getting paid.
By that metric, how is the economy doing?
Well, I think Matthew and I are in agreement on this, that the economy, on the one hand, is doing well, but it hasn't been working for many families.
And too many families are still struggling to recover from the depths of the Great Recession. So you have got jobs being created, but they're not being created at the pace of wage growth that one would expect, given the low unemployment and, quite frankly, given the level of profits flowing through the economy, and given the level of incomes flowing through those at the very top.
So you have this — on the one hand, the economy is increasingly benefiting those at the top of the income spectrum, while, the vast majority, you're not seeing those gains be broadly shared in terms of income growth.
So the job quality question is really fundamentally a challenge, I think, in terms of evaluating the course of this recovery.
Matthew Slaughter, what Heather's talking about, what you were talking about before is this issue of inequality between the rich and the poor, between those that have and those that don't have as much.
This is a perennial political issue as well. We see it rising up in the presidential race already.
What is the practical harm? I understand, if I look at what a CEO making 1,000 times more than his workers make or her workers make, that looks terrible, but help us understand what the practical harms of inequality are.
I think one of the biggest practical harms is not the inequality, per se. But when you look at far too many workers, when you look, over time, their inflation-adjusted earnings and their net worth has been flat, or, for many workers, falling, actually.
So the harm comes where people, as they're aging through life, and their families change, and they have children, what they're seeing is, their ability to make the savings and investments they'd like to make for their children's education, for buying homes, for preparing for retirement, they're not doing well as they used to be doing.
They're not doing well as they had hoped to be doing. And, in an increasing number of cases, they're not doing well as their parents and earlier generations were doing. So I think that's the real challenge, I think.
And, in some ways, I think the biggest disappointment of this recovery is, we have had too little conversation and policy movement in Washington, D.C., to build this skills for American workers at all levels, to build more ladders of opportunities, so that people and their families are gaining the skills that they need to thrive in this increasingly dynamic global economy.
Heather, you touched on this exact issue at the beginning. And you said, we have this rich, wealthy economy, let's take the time to address some of these structural problems that Matthew and you are talking about.
What are those things? If I put you in a policy-making position right now, what would you urge the president, the Federal Reserve, this — our economy, writ large, to do to address that?
Well, the first thing I would do is make sure that, when we measure economic progress, we're measuring it across families. We're not just looking at the aggregate. We're digging in. We're understanding these trends.
Two, we need to understand and do more to address the ways that inequality obstructs, subverts and distorts the processes that lead to growth.
So, just a couple cases in point.
So, first, we know there is now reams of economic evidence that shows that investments in early childhood are some of the most important investments we can make in future productivity, and can help workers now, workers with families participate in the labor force.
Yet we're not making the investments that our economic competitors are in early childhood, in universal pre-K, in safe and affordable and enriching child care. We're not making those investments because we haven't created the tax revenue to do that, yet we have all this money flowing through our economy.
Why have we made decisions to actually starve our federal government of the revenue it needs, at a time when we're experiencing this enormous economic growth, instead of making these investments in our economy?
So that's one of the ways that we're seeing inequality have this negative downward pull, both on growth today and growth far into the future.
Matthew Slaughter, the same question to you. What would you do from a policy perspective to address these fundamental problems that you see?
I would build a lifelong latter of opportunity for Americans at all those critical stages to build their skills, so they can thrive in the future.
And I would start exactly where Heather was. There's 25 million children in America today between the ages of zero and 5. And the research is overwhelmingly clear that the private and the social returns of those early childhood investments are really large.
So I would start by building that — sorts of investments for every child in America, regardless of the family or neighborhood in which they live. I would then look at high school graduates that don't go on to college.
Last year, there's about three million young adults that graduate from high school, but only about half of them went on to a four-year college. So for every one of the ones that didn't go to a four-year college, I would build the opportunity for them to earn at least a two-year degree that would be funded through public supports.
And then I would look more broadly at all the American labor force. The third rung I would build in this ladder is, there's about 100 million workers in the labor force today who don't have a college degree. And we know we hear from them and companies the need for ongoing upskilling and reskilling.
So imagine if we had some lifelong earnings credits that they could have with some regularity that would allow them and their companies to figure out the ways to build skills for them.
It's those kinds of public investments that Heather rightly points out we haven't been making in America in a creative, fiscally responsible way. And that's really what's going to address a lot of the anxiety that we see in American families about their concerns about opportunity.
All right, Matthew Slaughter, Heather Boushey, thank you both very much.
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